Historic Delavan industrial building to be converted into affordable apartments

When it opens in late 2019, the Bergamot Brass Works Apartments will be Delavan's first family apartment development financed with federal affordable housing tax credits.

The conversion of the Bergamot Brass Works building will create Delavan's first apartment development for families which uses federal affordable housing tax credits.(Photo: Tom Daykin / Milwaukee Journal Sentinel)

DELAVAN – A 75-year-old industrial building's upcoming transformation into loft-style apartments represents several firsts for this small Walworth County community.

It's the first such conversion project here, while also marking the first local development to use historic preservation tax credits.

And, when it opens in late 2019, the Bergamot Brass Works Apartments will be Delavan's first family apartment development financed with affordable housing tax credits.

All of this is happening in a building that is a prime target for conversion from manufacturing to residential use, according to developer Sig Strautmanis, of Fox Point-based General Capital Group LLP.

Sig Strautmanis (left), a partner at General Capital Group LLP, and Dan Baughman, owner of Bergamot Brass Works Inc., at the Bergamot building in Delavan. General Capital is buying the building from Bergamot and will redevelop it into affordable apartments.(Photo: Tom Daykin / Milwaukee Journal Sentinel)

Strautmanis discovered the three-story brick building in 2016 while scouting development opportunities in Walworth County. Delavan, with a population of around 8,400, is about an hour's drive southwest of downtown Milwaukee.

"I couldn't believe this project hadn't been done," said Strautmanis, a General Capital partner. "It sets up so perfectly for residential."

Many older industrial buildings tend to be square shaped, making it difficult and expensive to bring light into the middle of the buildings for apartments, offices or other new uses, he said.

But the Bergamot Brass building is a rectangular shape, stretching along an entire city block.

Another advantage is the location. The building, at 820 E. Wisconsin St., is next to a residential neighborhood and a short walk from Delavan's historic downtown business district.

The building's two-story section was constructed in 1943, with a three-story addition built in 1956, Strautmanis said. It initially housed an armaments factory, which made fuses during World War II, before switching to other manufacturing.

Those facts helped make the property eligible for historic status, allowing General Capital to seek historic preservation tax credits. Those state and federal tax credits help pay for part of the costs of historic restoration work.

General Capital also wanted federal affordable housing tax credits to help finance the project.

Those tax credits are awarded in annual competitions. Development firms sell them to raise equity financing for their projects.

The firms, in turn, are required to provide apartments at below-market rents to people earning less than 60% of the local median income.

Delavan has just one other apartment development financed with affordable housing tax credits: Parkside Village Senior Apartments.

Strautmanis said conversations with Pieroni, other city officials and neighborhood residents convinced them that converting the Bergamot building to affordable apartments would be good for the community.

Along with adding to the city's property tax base, the apartments will draw more people to patronize downtown stores and restaurants and help encourage other neighborhood investments, Strautmanis said.

Also, the community needs affordable apartments for people who work in Delavan's hospitality industry, led by Lake Lawn Resort, and other local businesses, Pieroni said. The apartments are expected to attract young single people, as well as families with children.

"It's going to be beneficial to our employers," Pieroni said.

The Delavan Common Council in 2017 granted zoning approval for the project.

That approval included a condition that General Capital have full-time on-site managers at the building, according to city documents.

The council also agreed to provide $1.25 million, through a tax incremental financing district, to help finance the conversion.

Those funds will be provided through part of the renovated Bergamot building's property tax revenue.

Once that amount has been paid out, over 20 years, all of the building's property taxes will go to the city, its school district and other local governments.

With the city's support, the Wisconsin Housing and Economic Development Authority in February announced that the Bergamot project was among 31 developments throughout the state that would receive affordable housing tax credits in 2018.

That group includes several projects in the Milwaukee area.

Workers at Bergamot Brass Works Inc. make brass belt buckles and other items. The company is selling the historic Delavan building to a developer that will convert it into loft-style apartments.(Photo: Tom Daykin / Milwaukee Journal Sentinel)

General Capital plans to complete its purchase of the 100,000-square-foot building by August. The firm hopes to begin renovating the building the end of the year, Strautmanis said.

Bergamot Brass Works Inc., which makes belt buckles, Christmas ornaments and other brass items, plans to move to a 20,000-square-foot building in Delavan, said owner Dan Baughman.

The company, which has around 12 employees, has operated at the Wisconsin St. building since 1981, Baughman said.

It will take around a year to convert the Bergamot building to 73 loft-style apartments, ranging from one to three bedrooms, Strautmanis said.

Eleven apartments will be provided at market rents, with 62 units provided at below-market rents, according to the state housing authority.

There also will be a small amount of street-level retail space that could house an art gallery or other business.

The building's interior features include a mix of concrete and hardwood floors, 15-foot high ceilings, large windows and exposed timber supports.